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Valve on Why Half-Life 2: Episode Three Never Happened

Valve Explains Why Half-Life 2: Episode 3 Was Never Made on IGN is an interview with Valve level designer Dario Casali discussing Valve's failure at executing the episodic model they envisioned for their follow-up to Half-Life 2. They sum it up by saying: "Casali ties it back to two things: the start of Source 2’s development, and Valve’s goal of making Half-Life games more than just another release." The conversation touches on the irony of the 12-year span between Half-Life 2: Episode Two and Half-Life: Alyx since the episodes were dreamt up because they didn't like the six year span between Half-Life and Half-Life 2. But as it turns out, as much as they wanted to crank out episodes, they didn't actually want to crank out episodes. Here's that part of the discussion:
While Episode One was successfully developed in about a year, Casali says “scope creep” became a problem. “We found ourselves creeping ever forward towards, ‘Well, let's just keeping putting more and more, and more, and more stuff in this game because we want to make it as good as we can,’” he explains, “and then we realized these episodes are turning more into sequels.”

Episode Two actually took two years to make – Valve started work on it at the same time as Episode One. The plan for smaller, faster releases didn’t line up with the studio’s ambition for the project, and the scope of Episode Two increased past its original concept. After Episode One shipped, some members of its team even joined the Episode Two team to help out. “I think at that point we realized, ‘Okay, maybe this episodes thing, it was a good concept, but we're not executing terribly well as far as getting things out quickly enough,’” Casali explains, so the team started rethinking things after Episode Two.